In its simplest definition, a chain order is not a requirement for a price and buyer to be transmitted to the stock exchange board, but to the fact that the first main order given is actively executed . In order to use the chain order form, the limit order given as the first condition must first be transmitted to the market and not yet executed. Unlike the Market order and the Limit order, the Chain Order is not transmitted directly to the stock exchange’s board, it is held in the passive to be transmitted. Basically, the chain order is activated as a result of the first main order given for the operation of the chain order to be transmitted to the stock exchange and worked.
How to Place a Chain Order?
To explain with an example; We want to buy Avax, whose current price is 250 TL, at a lower price than the current price and our price we want to sell at a profit is 270 TL. In order to achieve this profit level, we first need to place a “Limit Buy Order“ at a price of 220 TL in the number we want to buy. Then, before this order is executed, we place a “Chain Sales Order” at the price of 270 TL depending on the execution of the main order. In this case, we have completed the Chain Order making process. The point to be considered here is that we have given 2. The order, our chain order, has not yet been transmitted to the stock exchange. In order to be transmitted to the stock exchange board and to find buyers-sellers, the first order we gave must be fully executed.
How Does a Chain Order Work?
In our first example, let’s assume that the price, which is our main order that we entered the stock exchange board, is activated by seeing 220 TL. Here, the main Limit Buy Order that we sent first is processed and the token balance we have entered into our account has arrived. With the realization of the main order, the activation condition of the chain order was realized and the 2nd order, which we call the chain order. The condition that the order be transmitted to the market was fulfilled. The sales order priced at 270 TL, which we gave as a chain, has now been transmitted to the stock exchange. Then, if the price comes to 270 TL, this order will be executed, in this case, our entry-purchase price is 220 TL and the price we give as a sale is 270 TL.
The biggest advantage of the Chain Order is that after placing a “Limit Order”, we can place new limit orders for the same orders without waiting for these orders to be executed. This way, you don’t have to wait for your order to take a profit or write limit orders to stop a loss.
Multiple chain orders can be sent for a single limit order. This means that it can be used to enter a sell order for assets that you have not yet received, to limit its loss, or to enter a sell order for your target price. When trading using chain orders, you need to determine your goals and escape points well. If you enter chain orders at very close prices, these orders can work very quickly; If chain orders are entered at prices that are too far away, these orders may be ineffective. In addition, it should not be overlooked that if the main limit order is canceled, there will be cancellation in the chain orders. Another detail related to chain orders is that partially realized limit orders cannot be tied to chain orders as conditions.
What is the disadvantage of chain orders?
The biggest disadvantage we may experience when using Chain Orders is that the main order is not fully executed. In cases where the main order is not executed, chain orders do not work because the condition is not activated. To explain with an example; In the main order given by the user, you entered an order with a volume of 100 pieces and then entered a chain order with a volume of 100 again in order to stop a loss. When it arrives at the price you set in the main order, even if 99 of these orders are executed, your chain order will not be transmitted to the exchange. So if the price goes in the opposite direction, your loss may be higher than you estimated.